The European Commission's annual Digital Competitiveness Report got published today (PDF), and it highlights a number of issues related to IT policy in Europe from broadband penetration rates to the use of social networks and health information online.

One chapter of the study deals with online entertainment and its impact on content makers, and the results aren't really all that encouraging for the entertainment industry. Less than three percent of European Internet users had paid for online content during the three months preceding the survey the study is based on, and not many users are willing to bust our their credit card in the future. From the study:

"When looking at the individuals that did not pay for online audiovisual content, half of them state that nothing would make them change their minds."

What would get the other half to pay, you might ask? Lower prices were on top of the list, with 30% stating that price cuts would make them open their wallets. Around 20% of the non-paying online population would change its behavior if paid content had a better quality than free services. That's not all that much. The study explains:

"The limited willingness to pay in return for service improvements suggests that the take up of advanced content services is linked to the perception that many of these services are free or are provided in exchange for a flat rate internet connection."

In other words: People just expect stuff to be free online. Turns out this belief in free is so deeply vested in our collective consciousness that only 20 percent of the non-paying users would pay for content even if all the free options would be taken away from them.

That's a pretty important finding, and it goes counter to what entertainment industry executives have been claiming for years. It's impossible to compete with free, they argue, but paid online entertainment would thrive if only those file sharing sites and networks would get shut down. The study disagrees:

"(T)he low percentage of individuals that consider the possible lack of freely available online content as a reason for paying, calls into question the argument put forward by representatives of the content industry that European consumers will in the long term suffer from a lack of commercial availability of high quality content if the current model of audiovisual content distribution, based on illegal copying, is not curved."

Even if there was a hypothetical way to make all free online content disappear, users still wouldn't pay. People expect online content to be free because they have seen that it can be free. Which of course means that the only way to compete with free stuff is with free stuff.